No Profits Left in Rehabbing Properties?
Flipping houses may be more popular than ever at the moment but is rehabbing properties or at least making home improvements really still profitable?
According to a new report on common home improvements from Hanley Wood, at least 22 of them will lose home owners money. The best, according to the report, like finishing an attic bedroom or replacing a garage door barely help homeowners recoup 70% of what they put in. That is pretty miserable when fitting out a new living space could cost as much as $50k.
The average homeowner trying to bump up the value of their home so that they can sell or sell for a little more will find it very challenging to do so profitably without doing a good amount of research and shopping around. It’s clear from areas of the country like southwest Florida where existing homes are selling far below what it would cost to build them that construction costs are sky high. Be cautious about the projects on your to-do list when rehabbing properties or you may just be throwing good money after bad, especially if you are already underwater on your mortgage. Your rea estate agent may tell you that upgrading flooring for hardwood or staging your home will increase your property value but the truth is that while potential buyers may love the look and potentially even bid higher, they won’t actually add a dime to appraised value, unless you are making major renovations that lift the entire condition of the home.
On the other hand builders are reporting as much as 46% increases in orders for new homes. This means there are buyers out there and buyers who don’t mind paying top dollar for good looking properties. Merrill Lynch recently warned investors that 90% or more foreclosure homes are in need of serious work in order to prepare them to be rented or resold.
So for investors getting their hands on distressed homes cheap enough yes, there are big profits still to be made rehabbing properties and flipping them.
For the average homeowner who owes to much it may be wiser to let things as they are, opt for a short sale and find a cash buyer for selling their homes to.